The amount banks have lent to small companies fell by £700million in the first quarter of the year, despite new rules which were designed to boost debt funding for businesses.
The Bank of England (BoE) said banks only borrowed £2billion from its Funding for Lending Scheme (FLS) in the first three months of the year. This was down from almost £19billion on the final quarter of 2013, when the BoE still allowed the fund to be used to support mortgage lending.
BoE governor Mark Carney changed the rules in order to focu support on lending to businesses which came into force in February.
But net lending to all businesses through the scheme fell by £2.7billion in the quarter, of which £2billion was a fall in funds lent to large corporates, while the rest – £723million – was the amount lending to SMEs fell.
The bank said the fell in overall net lending was mainly due to lenders reducing the amount of money loaned against real estate, but the figures were still branded “disappointing” by business groups.
Phil Orford, Chief Executive of the Forum of Private Busines, said:
“The figures could be worse were it not for the extension of FLS, which increased the incentives for lending to small businesses in particular.
“At a sectoral level some of the decline in lending is down to reduced appetite to lend to the real estate sector so for the rest of the economy the picture is slightly brighter. At a time when the economy is picking up there is no doubt the figures remain slightly disappointing.”